Sanderson Farms Shares Rise after $4.53B Acquisition Deal

Shares of Sanderson Farms, Inc. (SAFM) jumped over 7% in early trade on Monday. The price action followed news that the poultry processing company is to be acquired under a joint venture agreement between Cargill and Continental Grain in an all-cash deal worth $4.53 billion.

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Cargill is a privately-held global food giant, while Continental Grain is a food and agriculture investment company.

The deal price of $203 per share of Sanderson Farms implies a 30.3% premium to the unaffected share price of $155.74 on June 18, 2021, prior to the media speculation concerning the potential sale of Sanderson Farms began.

Upon completion, Sanderson Farms will be combined with Wayne Farms, a subsidiary of Continental Grain, to form a new, privately held poultry business.

The newly combined entity will emerge as a top-notch poultry firm with superior assets, delivering a high-quality portfolio of products and services to end customers thereby driving robust growth going forward, the company said. (See Sanderson Farms stock charts on TipRanks)

Sanderson Farms CEO Joe Sanderson commented, “We are proud to be joining with Cargill and Continental Grain and we are confident that they will be strong stewards of the Sanderson Farms team, brand and assets going forward.”

He further added, “As part of the newly created company, Sanderson Farms and its new owners will remain committed to the employees, poultry producers, customers, communities, environment, and animals under our care, and to continuing to deliver the highest quality products and the best service in our industry to our customers.”

Subject to certain approvals, the acquisition is expected to close by the end of 2021 or in early 2022. Markedly, Wayne Farms CEO Clint Rivers will be leading the newly formed entity.

Following the completion of the deal, Sanderson Farms will become a private company, and its shares will no longer trade on NASDAQ.

Stephens analyst Ben Bienvenu recently downgraded the stock from Buy to Hold but maintained a price target of $190 (3% downside potential).

Overall, the stock has a Moderate Buy consensus rating based on two Buys and four Holds. The average Sanderson Farms price target of $186.33 implies 4.6% downside potential from current levels. Shares of SAFM have jumped 68% over the past year.